Is Unlimited Paid Time Off All It's Cracked Up to Be?

Is Unlimited Paid Time Off All It's Cracked Up to Be?

by Ben Mueller • July 07, 2015

It’s summertime, folks, and you know what that means: vacation time. Namely data has already revealed that summer is the season when employees take the longest vacations. But as any HR professional knows, actually tracking time off—and running a policy that employees like—is a year-long affair.

To do away with some of that administrative hassle, several companies—Namely among them—have implemented an unlimited paid time off policy. Unlimited? Really? Really. From weirdo sicknesses to mental health days to epic vacations, there’s no limit to the amount of paid days employees can take per year or consecutively. All they need is a manager’s sign off and the world is their cruise ship.

43% of the 250+ companies we work with offer some sort of unlimited time off plan.

At companies with unlimited plans, employees on average take about one more day off per year (15.6 days per year vs. 14.8 days per year at companies with limited plans).

Admittedly, we’ve always been fans of innovative, growing companies that push boundaries not just within their industries but in people management itself. Still, our findings suggests that the trend of unlimited plans may be rising, or at least becoming more prominent as a must-have perk in the startup benefit stack.

Several publications have reported on high profile companies going the extra mile with paid vacation, but few look at how such policies affect employee behavior. Aside from that extra day employees take on average, we looked deeper into our data:

For companies with unlimited time off plans, time off requests on average tend to be about 28% longer (more days taken).

That said, employees tend to make a slightly lower number of total time off requests than those at companies with a limited time off plan.

Put simply, on an unlimited plan, that’s less requests made but more days per request. At first glance, the idea that employee vacations are longer at companies with unlimited plans makes sense—they are theoretically more days to be taken, so employees go ahead and, well, take them. But what about employees making less requests when faced with an unlimited plan? Are they saving up for grand vacation plans around the world or personal projects, or is it that they feel the responsibility to do right by their company and limit the number of times they’re away from the office? Finally, is it worth it for companies to offer an unlimited PTO plan if it means every employee will, on average, take an extra day off?

The Balancing Act in Action

“An unlimited time off policy is all about trust,” said Matt Straz, founder and CEO of Namely. “We hire our employees because we know they’re the best fit to get the job done. So, of course we trust them to manage their own schedules effectively.”

Unlimited PTO isn’t the only perk at Namely that encourages work-life balance. Employees are also given $3,000 per year for professional development. They can head out to an industry conference, take a course at a university, anything they want, really, as long as it advances their professional career. It’s personal and professional growth, intertwined.

There’s an element of trust there, too—trusting the employee to plan and schedule his or her funding in the best way possible. “We want employees to grow themselves along with the company,” Straz said. “When it comes to time off, we want employees to have the freedom to work and live in the best way they know how."

Sailthru, the leading provider of personalized marketing communications technology and a Namely client, also has an unlimited paid time off policy. Emma Leeds is a manager on the People Team at Sailthru where she is an HR business partner for the engineering side of the organization. One of the goals of her team—and her work—is to make sure that the company culture stays intact as Sailthru staff continues to grow. She was surprised by Namely’s findings, saying most companies who put unlimited time off in place just think about the time saved on internal process, not how the policy will change employee actions.

Regarding the differences in requesting behavior, Leeds commented on how limited plans make larger breaks seem impossible for employees. “When faced with an [unlimited] policy, you can feel free to go to Europe and take two weeks. Everything’s on the table,” she said. The unlimited time off plan at Sailthru has been a positive force in the company, starting from the very beginning with Sailthru’s founders. “Right from the start, they didn’t want people to feel inhibited. It was a tiny, tiny company of a few people. And then at 5, 10, 15, to 20—they still felt like they could count on everyone, that everyone was responsible enough to know when they can and can’t take vacation. They just kept it open.”

"It’s super empowering… they see how they’re appreciated, they’re trusted, and they’re being treated like adults.”

- Emma Leeds, Manager, People Team at Sailthru, on the company's unlimited paid time off policy

Leeds was happy to report that the reaction from Sailthru employees has been wholly positive. They approach their work differently as far as she can tell, thanks to the balance between work life and the personal. “It’s super empowering… they see how they’re appreciated, they’re trusted, and they’re being treated like adults.” The policy fits right in-line with Sailthru’s ROWE workplace—a results-only work environment. As long as people are getting their work done, they can come in when they want and leave when they want. For Sailthru, an unlimited plan seems built-in to the company DNA.

Which Came First: The Culture Or the Policy?

If a growing company culture, like Sailthru, immediately values employee trust, then it follows that an unlimited time off policy could seem immediately attractive. But what about the other way around: a company looking to improve morale and culture seeking unlimited paid time off as the solution? Dr. Deepak Malhorta, vice president of human resources at one of India's leading infrastructure development and finance companies, is author of the new book Match the Age to Keep Them Engaged: Decoding the Secrets of Creating a Happy Workplace. Speaking with Namely, he was quick to point out that simply offering an innovative time off plan is not enough alone to boost engagement.

“For most leaders, unlimited does not mean limitless, unlimited does not mean unplanned, and unlimited does not mean that they won't track it down."

-Dr. Deepak Malhorta, author of the new book Match the Age to Keep Them Engaged

“An action plan is not effective unless implemented in true sense and spirit,” he said. Companies may find unlimited time off increases engagement over time, he continued, but it’s “not a shortcut to get you success as a boss.” It depends completely on the organization's leadership team to see the policy through. Plus, the company’s industry must be one where unlimited time off is attractive.

So, then, what is the key to success with an unlimited policy? “For most leaders, unlimited does not mean limitless, unlimited does not mean unplanned, and unlimited does not mean that they won't track it down,” Malhorta said. First, the company must devise a method to track time off with a time off manager and put the process in place. Then, you can’t get around that plan’s crucial final step: to “trust your employees not to abuse it.”

Unlimited is certainly an enticing word. But like free refills, of course unlimited vacation still has a limit—personally and professionally. The perks alone are not enough. For companies working with Namely, vibrant company cultures provide the support for each plan. Again and again, you see that the center of unlimited time off is empowerment—empowerment of the professional to own their schedule and own their life. “Without empowerment,” Dr. Malhorta said, “talent is zero.” From that angle, an extra day on the beach every year has never seemed so important.

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INFOGRAPHIC: The Most Popular Time Off Requests Are...

Ben Mueller

Ben Mueller is a Content Writer at Namely, the all-in-one HR, payroll, and benefits platform built for today's employees. Connect with Ben and the Namely team on Twitter, Facebook, and LinkedIn. If you'd like to contribute to the Namely blog, zip him an email.

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